Sri Lanka's Commercial High Court stayed for two weeks a petition by Hong Kong company Law Debenture Trust (Asia) Ltd. seeking a winding-up order against SriLankan Airlines (UL, Colombo International) over a default on USD175 million in bonds in June 2024.
On July 2, Judge Amali Ranaweera issued an enjoining order and adjourned the matter for 14 days. The next hearings will determine whether the issue will be further stayed or the lawsuit will move ahead.
Law Debenture Trust (Asia) represents DB Trustees (Hong Kong), the trustee of 7% government-guaranteed bonds on which SriLankan Airlines defaulted in June 2024. The Hong Kong firm sent a payment demand to the airline on June 11, asking for the principal amount plus a further USD34.3 million in unpaid coupons originally due in 2023 and 2024, for a grand total of USD209.3 million. The company warned then that the failure to pay the outstanding amount in 21 days would render SriLankan Airlines unable to pay its debts and open up the path for the winding-up petition.
In court, SriLankan Airlines argued that neither Law Debenture Trust (Asia) nor DB Trustees (Hong Kong) were legally creditors for those bonds and thus had no legal standing to initiate a winding-up petition. The state attorney further argued that as the bonds were guaranteed by the government and the airline was in the midst of restructuring, the petition should not be allowed to proceed.
Neither the airline nor the law firm responded to ch-aviation's requests for comment.
